Free cash flow assumes that the firm will remain competitive and continue growing, as it reflects the cash that a company can generate after laying out the money required to maintain or expand its asset base. This is essential for assessing the company's ability to pursue opportunities that enhance shareholder value.

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Free Cash Flow

Question 10

Multiple Choice

Free cash flow:

A) includes investing cash flows as well as the financial cash flows.
B) assumes that a company needs a constant asset base.
C) assumes that the firm will remain competitive and continue growing.
D) always includes increases in net fixed assets and in long-term liabilities.

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